Market Drivers – US Session – 4 February

Mohamed Abdelhamid 5 February, 2022 4:17 am Commodities, Forex Market, Global Stock Market, Market Update

The EUR/USD pair posted its largest weekly gain since March 2020, adding roughly 350 pips to reach a fresh 2022 high of 1.1483, to now trade at around 1.1430. The Euro soared following the European Central Bank monetary policy meeting, after President Christine Lagarde surprised market players with her hawkish tone, following the release of a mildly dovish statement.

Lagarde and policymakers took due notice of record inflation achieved in January. According to Eurostat, consumer prices in the eurozone rose by a record 5.1% YoY against the 4.4% expected and surpassing December’s 5% reading. The preliminary estimate of German inflation in the same period printed at 4.9%, also well above the market’s expectations.

Investors took the strong jobs showing as a reason for the Federal Reserve to move quickly as it starts to raise interest rates this year.

Stocks on Wall Street rose on Friday, as an unexpectedly strong jobs report scrambled investors’ expectations for coming interest rate increases and as the latest round of earnings reports offset some fears about declining corporate profits.

The S&P 500 climbed half a percent, a day after its steepest one-day drop in nearly a year. The index ended the week with a gain of 1.6 percent. The Nasdaq composite rose 1.6 percent on Friday.

In the context of a sharp spike higher in yields across the US curve as bond markets price in a higher likelihood of more aggressive Fed tightening and a higher terminal rate, a slowdown in EUR/USD’s rally on Friday makes sense.

Economic Data
The official employment report showed better-than-expected numbers in January. Nonfarm payrolls increased by 467000 despite the headwinds posed by record-high COVID cases in January, said analysts at Wells Fargo. They explain employment growth was broad-based across most industries, and upward revisions to the previous two months suggest that recent momentum in hiring remains very strong. They expected the FOMC to raise rates in March.

Canada’s unemployment rate has surged to 6.5%. Many businesses closed up shop in January due to the spread of the Omicron variant, which resulted in the loss of work for hundreds of thousands of Canadians.

Canada’s economy lost 200,000 jobs last month, according to Statistics Canada, as COVID-19 shutdowns related to the Omicron variant saw many businesses close up shop.

The data agency reported Friday that the decline pushed the unemployment rate up half a per cent, to 6.5 per cent. Most of the job losses were concentrated in Ontario and Quebec, two provinces that saw some of the hardest and earliest surges of the Omicron-driven wave, and which both moved to lock down in reaction.

On top of those who lost jobs entirely, the number of people who reported they worked less than half of their normal hours also skyrocketed, up by 620,000 people during the month.

Other Developments
Most Latin American stocks and currencies fell on Friday after data showing strong jobs growth in the United States created room for a more hawkish US Federal Reserve.

The gold market hovers around $1,800 per ounce and might not go anywhere anytime soon as market sentiment among Wall Street traders and analysts remains neutral to bearish. Retail investors remain bullish on gold.

The US oil benchmark jumped to above $92 per barrel early on Friday, its highest level since 2014, amid the Russia-Ukraine crisis and a deep freeze in Texas that disrupted some Permian oil production.

West Texas Intermediate crude oil broke this week the $90 a barrel mark for the first time since 2014 and continued to rally early on Friday. As of 7:46 a.m. EST, WTI Crude had jumped 2.04% on the day at $92.11, while Brent Crude was close to breaking $93 a barrel, trading up 2.00% at $92.93. Both WTI and Brent were on track to post their seventh consecutive weekly gain.

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